Turkey set to face economic losses of more than $25bn from earthquakes, report says

The total insured loss from the disaster is estimated to pass $5 billion

Thousands of buildings collapsed in the earthquakes that struck southern Turkey. EPA

Economic losses from the deadly 7.8-magnitude and 7.5-magnitude earthquakes that struck Turkey on February 6 are set to exceed $25 billion, with the road to recovery expected to take several years, a report has found.

The total insured loss from the disaster is also estimated to pass $5 billion, Moody’s RMS, a catastrophe risk modelling and solutions company, said on Thursday.

The estimates of economic loss only reflect the effect of the tremors in Turkey and not in Syria.

They include damage to property and contents, and business interruption across residential, commercial and industrial lines in the country, the report said.

They do not include post-event loss amplification or losses to non-modelled exposures such as transport and utility infrastructure.

The insured loss covers those to private insurers, as well as to the Turkish Catastrophe Insurance Pool.

The quakes, which struck southern Turkey, killed more than 47,000 people, with 11 provinces severely affected, including Gaziantep, Hatay, and Kahramanmaras, the Turkish Ministry of Environment, Urbanisation and Climate Change has said.

More than 335,000 buildings are reported to have been damaged.

“The earthquakes ruptured geometrically complex faults with multiple branches and were part of an active sequence that included over 400 events of magnitude-4 or greater," said Nilesh Shome, vice president of earthquake model development at Moody’s RMS.

"It is very unusual for an earthquake to trigger another event of such a magnitude as the magnitude-7.5 earthquake.

"The two largest earthquakes generated significant ground motions, and many areas were impacted by both events.”

The total cost of the quakes, including loss of life, damage to infrastructure, loss to the gross domestic product and loss of working days, is estimated at about $84 billion, which is equal to about 10 per cent of Turkey's GDP, a report published by the Turkish Enterprise and Business Confederation this month found.

That includes $70.75 billion of housing loss, $10.4 billion of national income loss and $2.91 billion of loss of working days, it said.

Observations from early damage reports issued by Turkish officials indicate a "systemic lack of adherence to seismic provisions, including government ‘amnesty’ programmes that have allowed continued occupancy of structures that do not meet seismic design requirements", the Moody's RMS report said.

"Ongoing research will aim to understand the full extent of these code lapses, together with any future code updates and enforcement mechanisms that could arise from this event."

Any tightening of the codes or more stringent enforcement will probably increase repair and rebuild times, especially because the number of destroyed structures is so extensive, the company said.

The disaster emphasised the "devastation that can arise when large magnitude events coincide with vulnerable building stock", said Laura Barksby, product manager at Moody’s RMS.

"We continue to learn from each significant earthquake, and the events in Turkey act as a wake-up call for other earthquake-prone regions, particularly concerning the true quality of the building stock.”

Looking ahead, the "road to recovery in Turkey will take several years due to the scale of the damage, and complex macroeconomic conditions that existed prior to the events, including significant inflation, will hamper the reconstruction and add to the overall costs", the report said.

The Turkish economy, which made a strong rebound from the coronavirus-induced slowdown and grew by more than 11 per cent in 2021, according to official data, has faced serious challenges in recent quarters.

Economic expansion decelerated to about 5 per cent in 2022 and is expected to moderate further to 3 per cent this year, the International Monetary Fund said.

Rising consumer price inflation hit a 24-year high of 85.5 per cent in October, before slowing to 57.7 per cent in January.

The Organisation for Economic Co-operation and Development expects inflation in Turkey to remain at 44.6 per cent in 2023, as opposed to Ankara’s projection of 24.9 per cent for this year.